Corporate innovation programs are primarily measuring revenue to show success –but that’s a risk, it a small incubated program is being compared to the primary billion dollar business lines. ROI is a fallacy metric of corporate innovation. Basing program success on ROI too early, rather than dedicated innovation KPIs, will not yield an accurate representation of progress.
In our recent Crowd Companies research, “The Corporate Innovation Imperative” (available for download here), we found there is a startling chasm between what organizations are measuring around innovation and which KPIs truly indicate program success from infancy through maturity. Corporate innovators who implement realistic measurement plans that focus on innovation KPIs, not immediate ROI, find greater executive support and are given adequate time to deliver results.
Our survey data of corporate innovation leaders reveals that the most common metric attached to innovation program success is increased revenue (66%), Other top measures of success include greater customer satisfaction (54.5%) and faster time to market for new products or improvements (45.1%) (see figure below for full list of innovation metrics).
Top Innovation Success Measures
Companies should focus on measurment depending on which phase of their innovation cycle they’re at. Lookoing at the classic Agile Startup methodology put forth by Eric Reis, companies (large and small) can focus on innovation metrics (usage, renewal, referral) in addtion to raw revenues.
Though innovators report increased revenue as an indicator of success, mature corporations reveal that focusing on ROI over other growth KPIs is actually harmful to innovation, and that programs should first encourage speed to market and increased ideas cycling through the pipeline. Migros, one of our interviewees, monitors KPIs of possible yield models instead of revenue for its innovation programs, with agreed-upon guardrails like maximum accepted expenditure per year and total investment volume over a period of time. It also plans out expectations for when innovations will break even in order to set realistic measurement goals and act accordingly if and when they are or aren’t achieved.
As companies climb the ladder of maturity, they also begin to clarify which of the four innovation goals (product innovation; operations; CX; or business model) they’re setting out to achieve (see figure below) — both within each program individually and in their innovation charter for the company overall. This impacts the metrics they attach to signal progress. When pursuing a new corporate innovation program, setting clear goals that answer “why this program?” is paramount to choosing the right initiative.
Corporate Innovation Impacts Customers in Four Ways
Advanced companies build their capacity for innovation by approaching innovation goals separately at first (avoiding the trap of too-early ROI expectations), each with its individual programs and support mechanisms. Then, as the corporation matures in its efforts, its programs will strategically progress to fulfill all four innovation goals within a culture of innovation that serves as the lifeblood of the organization.
For example, each of the above innovation goals have different associated KPIs for each, for example Product Innovation will be focused on usage, revenue, and referral, Operational Innovation may focus on reduced costs, higher quality, or faster time to market, Customer Experience innovation may focus on customer satisfaction, engagement, and reduced contact center costs, and Business Model Innovation will focus on newly generated ideas, avoiding disruption or partnerships with young startups.
(Photo via pexels)
Corporate innovation leaders face many challenges when attempting to get innovation programs off the ground. Peter Schwarzenbauer, chairman of BMW (a Crowd Companies member), is quoted saying, “Innovation is a willingness not to be understood for a long period of time.”
Change agents are those whose radical, innovative ideas are not internally understood –and the culture of the company resists change that could conflict with existing business models. In our research, we tested to see if technology adoption, relationship with startups, or if understanding new trends would have been a primary cause of challenges –yet over and over, we heard that internal culture was the primary issue.
[Ironically, most Corporate Innovation leaders had more challenges with internal culture –rather than combating disruptive startups from the outside]
As part of Crowd Companies’ research for “The Corporate Innovation Imperative” (available for you to download here), we surveyed individuals responsible for innovation within their organizations. Survey results (below) show that the top innovation challenges include: fostering an internal culture of experimentation and innovation (57%); juggling competing internal agendas and goals (56%); overcoming the middle management “permafrost” layer (45%); and moving forward despite deferred commitment and delayed action (33%).
(Above graphic is from report: Corporate Innovation Imperative, download on slideshare)
Top Innovation Challenges:
Our research also included interviews with innovation leaders and strategists from large corporations. During our interviews, we uncovered two additional challenges: keeping up with startup innovations and a steering progress with a lack of clear business goals.
- Foundational culture change is required to make significant progress.
Innovators first focus on internal education as a catalyst for cultural change, from external speakers to internal workshops, first at the executive level and then targeted toward other senior leadership. Innovation excursions are also helpful in the initial stages of program development to align executives and teams around what’s possible.
- Middle management “permafrost” doesn’t support innovation.
A symptom of a culture resistant to innovation is a middle management layer that can only see short-term goals, not long-term change. As a result, they encourage employees to operate efficiently within their current roles and responsibilities by meeting consistent benchmark metrics. This doesn’t leave room for the innovators to explore new ideas. We heard this middle management layer called everything from the “frozen tundra” to the “permafrost” to the “antibodies.” It’s critical for senior leadership to embrace innovation from the top down, so middle management is empowered to support innovative employees without fear of retribution.
- Startups innovate quickly, leaving corporations playing catch-up.
Many companies are burdened with complicated processes, long production cycles, and bureaucratic red tape for moving forward with new ideas. These hindrances stand in direct contrast to the countless nimble startups swiftly prototyping and executing ideas that directly compete with slower-moving enterprises. Innovators commonly turn to educational workshops (in-house or at vendor locations) and university partnerships to speed internal innovation, as well as innovation outposts.
- Companies lack clear business goals for innovation programs.
Corporate innovation leaders, who we’ve published more data about their role here, are tasked with tying programs to business metrics and proving ROI to executives, yet they often lack the budget needed to adequately resource said programs to an extent that generates results. There is hope for innovation, though. Our survey revealed four innovation programs with more clearly defined business goals: dedicated innovation teams, innovation outposts, innovation “centers of excellence,” and startup investment programs. Mature companies are even defining innovation goals by individual program, while simultaneously laddering metrics up to overarching departmental and company KPIs.
Companies need to clear the obstacles for Corporate Innovation leaders.
The Corporate Innovation teams are often struggling with internal conflicts –more than combating external startups. When I’ve spoke to these leaders, they are willing to risk their jobs to make a change to help innovate their employer, some said “I’m banking on my employability, not my employment” as they knew they could get jobs elsewhere if it didn’t pan out. It’s key that management help offer them a road towards innovation success. Also, read Steve Blank’s list of the 13 things companies are doing to hamper innovation, or Stefan Petzov of Swisscom’s post on corporate challenges.
(Photo from Cindy Chen)
Experience and Education Set the Foundation for Leadership.
This is a detailed breakout from our recent report on the Corporate Innovation Imperative, over the coming months, more will be revealed about how large companies are behaving like startups –while using their unique capabilities as a large organization.
Attracting the right talent for innovation is a challenge for corporations competing with shiny, agile startups, as is long-term employee retention. Innovative corporations are building innovation talent pools by offering interesting programs, intrapreneur growth, and worthwhile incentives. Because, without a focus on attracting and maintaining innovation leaders, corporations are left seeking a hero to guide their journey toward change.
(Above graphic, from the recent report The Corporate Innovation Imperative, download the partial version as full version is for Crowd Company members.)
In the report, we analyzed more than 140 LinkedIn profiles of individuals responsible for corporate innovation in varied industries and countries in order to create a persona of the average corporate innovation leader. Use these characteristics to guide your hiring and talent acquisition process, as well as gauge when leaders may be seeking opportunities for advancement or new challenges.
The term “Tundra” emerged as a common theme among corporate innovation leaders, as they described company culture, and specifically, middle management as the “frozen middle layer” or “Tundra” or other similar metaphors of a dense, rigid, cold layer. A more biological metaphor included “antibodies” that are designed to raise barriers to corporate risk. These are very creative, passionate, and motivated professionals.
Key Stats of the Corporate Innovator Persona:
- Time spent in current role: 3.2 years. This shows that innovators need to know the business, as well as internal stakeholders, before generating new ideas. They must have credibility to sell up to executives. Many were recently hired from the outside, to shake up the inside, some have entrepreneurial backgrounds.
- Duration of career: 18.6 years. Corporate innovation leaders aren’t fresh out of college. Rather, they have the experience and know-how to align minds and departments around change. Corporate innovation programs often rock the boat, and change agents need to have direct experience steadying the mast and pushing forward. Much of the success of innovation teams depends on internal alignment among tangential departments, like legal and marketing, to move from ideation through implementation.
- Number of industries in career: 3. With experience comes a desire for variety. Our research uncovered that throughout their careers, corporate innovation leaders will apply their learning to further multiple areas of the business ecosystem.
- Percentage with “innovation” in title: 61%. Not only do the majority of leaders have “innovation” in their current title, but 40% also had it in their previous role. This indicates that innovation requires a groundswell before reaching a level where resources are allocated toward dedicated leadership. This slow growth trend of innovation leaders reaching senior levels is also reflected in the fact that only 4% have the title of “Chief Innovation Officer.”
- A highly educated cohort: 46% have an advanced degree. With age and experience often comes higher educational degrees, as is reflected in our finding that nearly half of corporate innovation leaders tout at least a master’s degree.
Mature corporations understand that an innovation program is only as good as the employees behind it. Follow in the footsteps of corporations like Verizon, which has multiple innovation teams in various business units, each with talented members dedicated to both ideation and execution. This helps them move efficiently to prototype and launch new innovations.
Also focus on talent retention, as there’s a commonplace and ever-present threat that your best and brightest will be poached (or, at the very least, approached) by competing corporations or startups. Leaders at mature organizations consistently ask themselves, “Are we doing enough to keep our most innovative employees happy?” The most effective incentives tie employee progress on innovation KPIs directly to pay structure.
I’ve even heard from these innovation leaders, that they’re willing to risk their jobs at their companies to make significant changes, despite butting up against the culture of non-change. One leader commented “I’m backing on my employability –not my employment” when I take risks. This entrepreneurial mindset is a key one to properly manage, and clear internal roadblocks for if an employer wants to retain these go-getters.
If you want to connect with fellow corporate innovation leaders, we, at Crowd Companies have hundreds of members that have this specific role, in our peer to peer council, who meet at our events, online, and beyond.
Our latest research report is now available, which was focused on how large companies are internally getting ready for the many waves of technology disruption that are here now, and coming. Companies need to be ready, with a dedicated innovation program –not just knee-jerk reacting to each new set of technologies that emerges. We asked a number of companies on how they defined innovation, and heard this common pattern:
“Corporate Innovation Defined: Doing something new that solves customers needs –even if it may be in conflict with your existing business”
We’ve made a high-level partial version available to the public on slideshare, but the full report is limited to our members at Crowd Companies. Over the coming months, we will publish other insights around corporate innovation.
- The top challenges companies face in corporate innovation include: fostering an internal culture of experimentation and innovation (57%); juggling competing internal agendas and goals (56%); overcoming the middle management “permafrost” layer (45%); and moving forward despite deferred commitment and delayed action (33%).
- Though 61% of innovation leaders have “innovation” in their title, only 4% have the title of “Chief Innovation Officer.”
- Corporate innovation leaders aren’t fresh out of college. Rather, they have an average experience of 18.6 years, culminating in the know-how to align minds and departments around change.
- There are 10 types of corporate innovation programs that companies pursue: corporate innovation team; innovation center of excellence; intrapreneur program; open innovation; innovation excursion; innovation outpost; technology education; external accelerator partnership; startup investment; and startup acquisition.
- The most commonly deployed corporate innovation programs include corporate innovation teams (78.9%); innovation centers of excellence (61.4%); and technology education (54.4%). This shows that companies are first focusing internally on building the right teams, getting governance and processes in place, and educating current and new employees on emerging technologies before spending resources on rolling out external programs or investing in the startup scene.
- The most common metric attached to innovation program success is increased revenue (66%), though that can be a fallacy metric if weighed too heavily too soon, before innovation programs have the chance to prove real ROI. Other top measures of success include greater customer satisfaction (54.5%) and faster time to market for new products or improvements (45.1%).
Who we Interviewed:
In addition to surveying large companies, we interviewed over 44 leaders at large companies, or at companies that closely partner with them on innovation initiatives.
- 500 Startups || Khailee Ng, Managing Partner
- Accenture || Jitendra Kavathekar, Managing Director of Open Innovation
- Achmea || Ilse Harmelink, Marketing Partners and Digital Marketing
- Adobe || Cindy Springsteel, Vice President of Global People Resources Business Partners
- ADT || Robert Beaver, VP Technology and Innovation
- AXA || Guillaume Cabrere, CEO AXA Lab in Silicon Valley
- Cisco || Alex Goryachev, Director of Corporate Strategic Innovation Group
- Colgate-Palmolive || Jenny Gomez, Marketing Director of Innovation
- Comcast || Danielle Cohn, Director of Entrepreneurial Engagement
- Electrolux || Heather Hanson, Global Head of Marketing Technology
- European Institute of Technology || Patrick Consorti, EU-US Industry Partnerships
- Fujitsu || Kevin Krejci, Business Development and Alliance Manager
- Fujitsu || Mohi Ahmed, Senior Director of Open Innovation Program
- Galvanize || Ryan Nadeau, Director of Special Projects
- GE || Alex Tepper, Managing Director of GE Ventures
- HP || Vincent Brissot, Head of Channel Marketing and Operations
- Ideation || Charles Lee, Founder and CEO
- Johnson & Johnson || Melinda Richter, Head of JLABS
- Leroy Merlin || Stephanie Hajjar, Head of Innovation and Entrepreneurship
- Mastercard || John Sheldon, SVP, Group Head of Innovation Management
- Nestle || Mark Brodeur, VP Digital Innovation
- Nexxworks || Peter Hinssen, Founder
- Nexxworks || Laurence van Elegem, Marketing and Communications
- Nexxworks || Steven van Belleghem, Founder
- Pilot44 Labs || Andrew Backs, Founder and Chief Innovation Strategist
- PostNL || Michel Bagli, Team Lead of Growth Strategy
- Protiviti || Jay Thompson, Managing Director
- Protiviti || Steven Massengill, Technology Consultant
- Rocketspace || Canice Wu, Director of Corporate Innovation
- Savvy Millennial || Savannah Peterson, Founder
- Sparks & Honey || Annalie Killian, Director Human Networks
- Stanford University || Reilly P. Brennan, Executive Director of REVS
- Swisscom || Gregory Leproux, Managing Director and VP Business Development
- Swisscom || Stefan Petzov, Principal Architect Swisscom Cloud Lab
- Swiss Post || Lorenz Wyss, Head of Ideation and Idea Management
- Swiss Post || Theirry Golliard, Head of Open Innovation and Venturing
- TD Ameritrade || Sunayna Tuteja, Lead Digital Strategy, Experience, and Innovation
- The Intrepreneur Lab || Milan Samani, Founder
- Visa || Shiv Singh, SVP Digital and Marketing Transformation
- Walt Disney Co. || Duncan Wardle, VP Creative Inc. (former)
- WDHB Strategic Learning || Sam Mueller, COO
- Wells Fargo || Darius Miranda, VP Innovation Group
- Wells Fargo || Nathan Bricklin, SVP Head of R&D Strategy and Experience
- WL Gore || Linda Elkins, Leader of WL Gore Silicon Valley Innovation Center
We will continue to publish research on disruptive trends, our next report will be on the Business Models of Blockchain, and more insights from the Corporate Innovation imperative will be shared, be sure to subscribe to this blog.
The purpose of this post is to list out how startups are bypassing established companies so that incumbents glean the best tactics and apply them to their own corporate innovation.
Tech startups are designed, built, and managed differently than established companies, giving them a competitive edge against incumbent corporations. This post outlines startup advantages, including cultural differences, business models, and business strategies. But, established companies aren’t sitting around idle; they’re adopting these same strategies in order to compete, emulate, or lead in their market. See how corporations are deploying ten types of innovation programs.
In our work at Crowd Companies, we’ve observed that big, established companies possess advantages in their tremendous resources, trusted brand names, and experience in their field, they are also plagued with gears that are slow to turn.
11 Ways Startups Outrun Established Corporations:
Startups have unique cultural differences:
Herein lies the greatest difference between a startup and and an established corporation: The core ethos of the organization is built differently.
- 1) Smaller, faster. Smaller in size, startups can quickly redirect employees in nearly any direction; there are fewer minds to change and fewer levels of management to get through. Additionally, startups hire innovators who are focused on new ways of doing business, which also enables them to quickly shift in unorthodox directions.
- 2) Embraces failure. Because startups have less at stake, they foster a culture that’s not afraid to fail. You’ll hear mantras that encourage “Fail Fast” or “Fail Forward” risk-taking in exchange for the potential of innovation. Meanwhile, established companies can be hesitant to pivot and disrupt their existing revenue streams.
- 3) Attracts high-risk/reward workers. Unlike stable career positions, entrepreneurial minded professionals are attracted to the startup lifestyle. This encourages wilder career moves in long shot startups, with the equity promise for high financial gain and industry fame.
- 4) Attracts skilled talent. Startups often attract top talent due to their sense of purpose and passion, quality of work life, perks, and promise of making it rich through equity packages rather than a salaried job at an established company.
- 5) They’re younger. As a whole, startup employees and founders, at least in tech, tend to be younger; they can afford to take more career risk, often with fewer family, health and financial commitments. Although controversial, Mark Zuckerberg claims they’re just “smarter” than older cohorts as they may have the latest skills, or can be easier molded.
Startup business models are setup differently:
Startups are set up differently as business entities than established corporations, giving them additional advantages to take down their target markets.
- 6) VC funded. Ample VC funding enables radical innovation and encourages high-risk business models, often designed to disrupt incumbents through the use of networks, technology, and new methods of going to market.
- 7) Privately held. Startups have more freedom to disrupt an existing market, as they’re not exposed to the scrutiny over quarterly earnings like public companies are. As a result, these startups answer only to their executives and board, and they can plan beyond the next quarter.
- 8) Growth over revenue. Startups are not held to the same standards as publicly traded corporations. Startups are often focused on market penetration and adoption rather than just revenue. To avoid upsetting users, Facebook didn’t turn on its “mobile advertising” engines until post-IPO.
Startups have an unorthodox business strategy:
The way startups deploy their day-to-day businesses is different than established companies; they move faster, with greater risk, and are able to quickly ship product.
- 9) Tackle niche, then grow. Startups can attack small markets, then grow them to compete with established companies. Established corporations often don’t have the appetite to defend smaller markets, giving startups the ability to gain footholds as they expand.
- 10) Faster than the law. Startups often challenge existing rules, laws, and regulations. They’re able to move faster than regulators, then reshape the discussion to their benefit, like Airbnb, Uber, and Lyft have.
- 11) Quickly ship product. Startups are known for the practice of “shipping fast” in their product releases: releasing versions daily if not hourly, and are taught that shipping a product when it’s 90% or even 80% finished is acceptable — rather than perfecting it like an established corporation would.
Looking at across these 11 different ways that startups are able to outrun established corporations, you can see that the very core makeup of the culture, business setup, and their strategies are often different than older established companies.
Established companies aren’t standing still, waiting to be disrupted, they are either weighing whether they should build similar features or purchase the startups outright, or emulating the same characteristics of startups. Established companies who don’t move faster, run the risk of being blind sided from a young market competitor.
We’ll build on this in an upcoming report on corporate innovation and explain how established companies are starting to act more like startups and make their corporations more agile.
(Credits: I shared a short list on Twitter, and received some insightful suggestions, including from: Serena Ehlich, Julian, and Caleb Parker. Image from Pexel)
Rather than arbitrarily throw around the “innovation” word, understand how it impacts your customers, and be specific. Innovation comes in four flavors: product innovation, operational innovation, customer experience innovation, and business model innovation.
Corporate innovation isn’t easy. Stefan Petzov, an innovation professional at Swisscom, a Crowd Companies member, has outlined the many challenges that innovation programs inherently face. In particular, the first challenge he lists out is that companies struggle because “the expected outcome is not clearly defined.” Clarity is paramount.
One way to solve this top-level challenge is to ensure your company and innovation partners have a standard nomenclature for how innovation is used. We looked at structuring this language around products, business units, or functions, but found it would be most helpful to structure it around customer benefit.
First, some qualifications on the scope of this discussion: The following is focused on how innovation is done within a company, not about external activities like partnerships, investment, acquisition, accelerators, and more. In a recent post, we identified the ten types of innovation programs, which goes into a bit more detail.
Corporate Innovation Impacts Customers in Four Ways:
||Benefits to Customers
|1) Product Innovation
||Often led by R&D, product features are enhanced, or new products are developed based on the product roadmap.
||Nike evolved beyond shoes to Nike Plus, expanding its offerings. Also, new product lines like Nestle’s launch of Nespresso grew a loyal customer base.
||Continued improvements on product features and benefits, as well as new product lines.
|2) Operational Innovation
||Often led by operations, new processes increase productivity and efficiency, or reduce costs associated with employees, partners, and the supply chain.
||In the ‘70s, Japanese automakers like Toyota and Honda increased the efficiency of auto production and reduced overall costs through kaizen.
||Products emerge faster, with more consistency, and often at a lower cost.
|3) Customer Experience Innovation
||Often led by marketing and customer care, new services, interfaces, and channels are developed to improve customer interactions, while the product often stays the same.
||Hugo Boss partnered with Uber for product delivery, transportation, and concierge. Swisscom launched “Friends” so customers can self-support.
||New services beyond the core product offering, including supportive media, communications in new channels and mediums, and white-glove service.
|4) Business Model Innovation
||Often led by innovators or strategists, companies identify complete new revenue streams from existing core capabilities.
||BMW launched ReachNow, enabling customers to rent vehicles on demand — rather than buy — packaged with parking services, insurance, and more.
||Core product and service offerings are provided in new ways that meet shifting customer expectations –reframing customer relationships in the face of disruptive technologies.
With new technologies emerging at a rapid pace (who knew Pokemon Go would be a top app within just a few days), companies have no choice but to accelerate their rate of innovation. Unfortunately, most companies focus exclusively on only one or two forms of corporate innovation, forgetting others that could be a key competitive advantage to satisfying the ever-changing expectations of customers.
Most companies focus on Product Innovation, which can quickly escalate into a race amongst competitors towards a commoditization that churns out less-than-useful new products rather than true innovation that revolutionizes the way customers live. In recent periods, I’ve also observed companies redeploy attention on Customer Experience Innovation as they scramble to reach customers in a multitude of digital and in-person channels.
An area we focus heavily on at Crowd Companies is how companies tap into the power of people and technology to unlock new revenues by serving customers in new ways through Business Model Innovation, whether that’s in the Collaborative Economy or the Autonomous World, where robots take the wheel, and whatever comes next.
To maximize customer satisfaction — and ultimately competitive edge — companies must innovate in all four of these areas, as well as ensure that the innovation management team is coordinating all efforts toward a single goal.
In closing, when you’re using the word innovation, be clear about which of the four types you’re referring to, as it impacts your company, employees, and customers in significant ways.
(Credit to Jairo Venegas for the focus on operational innovation, and Jamie Sandford for the link to the Science of Innovation.)